RETURNING OF REFUND APPLICATION CANNOT BE TREATED AS ITS DISPOSAL.

[Mr. M. GOVINDARAJAN]

                        Sec.11B of the Central Excise Act, 1944 (‘Act’ for short) deals with the claim for refund of duty.  For the purpose of this article the provisions of Sec.11B is reproduced as below:

1) Any person claiming refund of any duty of excise and interest, if any, paid on such duty may make an application for refund of such duty and interest, if any, paid on such duty to the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise before the expiry of one year from the relevant date in such form and manner as may be prescribed and the application shall be accompanied by such documentary or other evidence (including the documents referred to in section 12A) as the applicant may furnish to establish that the amount of  duty of excise and interest, if any, paid on such duty in relation to which such refund is claimed was collected from, or paid by, him and the incidence of such duty and interest, if any, paid on such duty had not been passed on by him to any other person:

Provided that where an application for refund has been made before the commencement of the Central Excises and Customs Laws (Amendment) Act, 1991, such application shall be deemed to have been made under this sub-section as amended by the said Act and the same shall be dealt with in accordance with the provisions of sub-section (2) substituted by that Act;

Provided further that the limitation of one year shall not apply where any duty and interest, if any, paid on such duty has been paid under protest.

(2) If, on receipt of any such application, the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise is satisfied that the whole or any part of the duty of excise and interest, if any, paid on such duty paid by the applicant is refundable, he may make an order accordingly and the amount so determined shall be credited to the Fund:

Provided that the amount of duty of excise and interest, if any, paid on such duty as determined by the Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise under the foregoing provisions of this sub-section shall, instead of being credited to the Fund, be paid to the applicant, if such amount is relatable to—

(a) rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(b) unspent advance deposits lying in balance in the applicant's account current maintained with the Commissioner of Central Excise;

(c) refund of credit of duty paid on excisable goods used as inputs in accordance with the rules made, or any notification issued, under this Act;

(d) the duty of excise and interest, if any, paid on such duty]  paid by the manufacturer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(e) the duty of excise and interest, if any, paid on such duty] borne by the buyer, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to any other person;

(f) the duty of excise and interest, if any, paid on such duty borne by any other such class of applicants as the Central Government may, by notification in the Official Gazette, specify:

Provided further that no notification under clause (f) of the first proviso shall be issued unless in the opinion of the Central Government the incidence of duty and interest, if any, paid on such duty has not been passed on by the persons concerned to any other person.

(3) Notwithstanding anything to the contrary contained in any judgment, decree, order or direction of the Appellate Tribunal or any Court or in any other provision of this Act or the rules made there under or any other law for the time being in force, no refund shall be made except as provided in sub-section (2).

(4) Every notification under clause (f) of the first proviso to sub-section (2) shall be laid before each House of Parliament, if it is sitting, as soon as may be after the issue of the notification, and, if it is not sitting, within seven days of its re-assembly, and the Central Government shall seek the approval of Parliament to the notification by a resolution moved within a period of fifteen days beginning with the day on which the notification is so laid before the House of the People and if Parliament makes any modification in the notification or directs that the notification should cease to have effect, the notification shall thereafter have effect only in such modified form or be of no effect, as the case may be, but without prejudice to the validity of anything previously done there under.

(5) For the removal of doubts, it is hereby declared that any notification issued under clause (f) of the first proviso to sub-section (2), including any such notification approved or modified under sub-section (4), may be rescinded by the Central Government at any time by notification in the Official Gazette.

Explanation.—For the purposes of this section,—

(A) "refund" includes rebate of duty of excise on excisable goods exported out of India or on excisable materials used in the manufacture of goods which are exported out of India;

(B) "relevant date" means,—

(a) in the case of goods exported out of India where a refund of excise duty paid is available in respect of the goods themselves or, as the case may be, the excisable materials used in the manufacture of such goods,—

(i) if the goods are exported by sea or air, the date on which the ship or the aircraft in which such goods are loaded, leaves India, or

(ii) if the goods are exported by land, the date on which such goods pass the frontier, or

(iii) if the goods are exported by post, the date of despatch of goods by the Post Office concerned to a place outside India;

(b) in the case of goods returned for being remade, refined, reconditioned, or subjected to any other similar process, in any factory, the date of entry into the factory for the purposes aforesaid;

(c) in the case of goods to which banderols are required to be affixed if removed for home consumption but not so required when exported outside India, if returned to a factory after having been removed from such factory for export out of India, the date of entry into the factory;

(d) in a case where a manufacturer is required to pay a sum, for a certain period, on the basis of the rate fixed by the Central Government by notification in the Official Gazette in full discharge of his liability for the duty leviable on his production of certain goods, if after the manufacturer has made the payment on the basis of such rate for any period but before the expiry of that period such rate is reduced, the date of such reduction;

(e) in the case of a person, other than the manufacturer, the date of purchase of the goods by such person;

(ea) in the case of goods which are exempt from payment of duty by a special order issued under sub-section (2) of section 5A, the date of issue of such order;

(eb) in case where duty of excise is paid provisionally under this Act or the rules made there under, the date of adjustment of duty after the final assessment thereof;

(ec) in case where the duty becomes refundable as a consequence of judgment, decree, order or direction of appellate authority, Appellate Tribunal or any court, the date of such judgment, decree, order or direction ;

 (f) in any other case, the date of payment of duty.

                        On the analysis of the above section it can be inferred that any person making an application for claim of refund shall make it within one year period of time.  On receipt of the refund application the authority concerned shall satisfy himself that the said amount is refundable and on analysis of unjust enrichment the authority may either credit the refund amount to the Fund or refund the amount to the claimant as stipulated in the section.   But in the section nowhere it is prescribed to refund the claim application received from the claimant.  Therefore refunding the claim application for refund is not the correct disposal as per Section 11B of the Act.  This principle is confirmed by the Kerala High Court in ‘Sudha Ramachandran V. Union of India’ – 2011 (24) STR 175 (Ker) .  In this case the petitioner claimed refund of service tax already paid with the Department.    The claim was made by her under Sec. 11B of the Act.  The said application was returned by the authority observing that the decision of the Delhi High Court in ‘Home Solution Retail India Limited V. Union of India’ – 2009 -TMI - 33136 – (DELHI HIGH COURT) is under challenge in appeal filed by the Department before the Supreme Court of India.   This returning order has been challenged before High Court, Kerala.

                        The petitioner contended that-

• When an application for refund under Sec. 11B is preferred, the authority concerned is bound to adjudicate and pass speaking order on such claim for refund;
• There is no provision for return of refund application;
• The Supreme Court has already admitted the appeal filed against the decision of Delhi High Court and the issue involved is a subject matter pending consideration before the respondent, the Department is not in a position to adjudicate upon eligibility of the petitioner and the refund application was returned;
• Sec.11B provides limitation period of one year for claim of refund; if the refund application submitted by the petitioner was not entertained the same may cause prejudice to the petitioner, because the petitioner will be precluded from claiming refund raising question of limitation.

The Department contended that-

• The question regarding liability for payment of service tax has not yet attained finality and the issue is pending before the Supreme Court; therefore the petitioner’s claim cannot be considered at this point of time;
• The petitioner has not produce documents in support of the claim along with the refund and therefore the refund could not be allowed.

The High Court held as follows:

• There is no enabling provision so as to return any claim;
• The authority concerned has got a duty to consider the application and to pass orders thereon;
• If the Department is of the opinion that the question regarding liability of the petitioner for the payment of tax is yet to be decided, it is for the authority to reject such claim on that basis; or the authority can keep adjudication and disposal of the claim till final decision is arrived on the matter;
• For adopting such a course, the apprehension expressed by the Department is regarding liability for payment of interest under Section 11BB; Interest is payable only on amounts which is ordered to be refunded within a period of three months from the date of application onwards;   therefore the question of payment of refund will arise only if the application is allowed.

The High Court on the above grounds allowed the petition and remanded the matter to the authority to dispose of the claim application for refund on merits.